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Bending the cost curve and LEAN management

Steve Bahls, President of Augustana College

If you’ve ever heard the words “cost containment” and felt a prick of fear in your heart, you’re not alone. It was with that thought in mind that we at Augustana undertook an analysis of our cost structure in 2015. The resulting report, funded by the Knowlton Foundation and prepared by ALIX Partners, was not unexpected: we needed to become leaner and more efficient in our management practices, to bend the cost curve, if you will.

But LEAN management need not translate into lost jobs and opportunities for the Augustana community. On the contrary. We determined that we could reduce costs in some areas, increase revenues in others, and improve quality by following one simple premise: The people responsible for daily operations are usually the ones who see inefficiency in its most glaring form.

Thus, the core of our strategy was—is—a commitment to work with our people to imagine better ways of doing things. This is an extension of our shared governance model, in which solutions to the problems facing our campus are not imposed from the top down but rather bubble up from those with real skin in the game.

Our reasoning was simple: When we bend the cost curve, we remain affordable to students and maintain our commitment to provide them the true liberal arts experience they seek. In short, becoming more efficient allows us to invest and re-invest in the academic programs that are Augustana’s beating heart.

In the last three years, our student-faculty ratio has held strong even as our administrator- and staff-to-student ratio has decreased, not through layoffs but through retraining and reassignment. This has allowed us to reduce expenses for families without reducing services.

Examples abound. Most visibly, our two dining halls – which did not just appear dated but were dated, with meal options, ranging from boiled to fried, that did not appeal to our student body – were due for a complete makeover. We closed both and built a new facility, realizing a $1 million savings in deferred maintenance in the process.

Other improvements have included converting from a trimester system to semesters; establishing minimum course sizes; recognizing that open faculty positions belong to the institution and its greatest need rather than to any one department; and redesigning the routes of our campus postal employees, shaving hours off the time it takes to deliver the mail.

To facilitate all of this, we hired a LEAN management expert—a veteran of the healthcare industry, where these concepts have been in use for years—to head up our program. Carla Roman works with teams of Augustana employees from across the institution, made up of those directly involved in the work being examined, those affected by it, and those at a remove from it, who can provide a fresh perspective.

“What is the gap between where we are today and where we want to be?” Roman says she asks at the start of any process. “We watch the work and talk to the people doing the work. We gather information related to what the process really looks like. Then we come back and ask ‘why do we do it this way?’”

Roman walked the mail route with a member of our mail staff, counting 9,000 steps in the process. By redesigning the route, they cut that number down to 6,000, shaving off 3.5 hours, time that is now dedicated to other activities and responsibilities.

She’s also worked with staff teams to streamline the process by which community members reserve space on campus, allowing us to maximize our resources and realize more revenue from facilities rental; centralized the monthly billing process and shortened it from 15 days to six; and worked with the admissions office to fully digitize its work. Next up: registration and orientation, with an eye toward keeping parents and students out of lines and increasing their satisfaction with the process.

“Typically, as you have a LEAN transformation in an organization, you’ll see people embrace this and see the value of it,” Roman says, noting that community members who have participated in multiple exercises with her are now taking the strategy back to their home departments.

We’re working with our people to imagine better ways of doing things on campus, and the results are hard to argue with: savings of $2 million to $3 million so far.

Our goal, consistent with Augustana’s values and our policy of encouraging employees to come up with creative ideas for improving campus life, is not to save money in the short run but to improve the quality of the student experience, today and going forward. We believe we are doing exactly that.